Drive Shack Inc. (DS) shares jumped more than 10% during Thursday's session after B. Riley Securities reiterated its Buy rating and raised its price target to $5.50 per share.

Key Takeaways

  • Drive Shack shares rose more than 10% during Thursday's session after B. Riley reiterated its Buy rating and raised its price target to $5.50.
  • Analyst Eric Wold cited management's impressive ability to navigate the pandemic, manage cash flow, and restart operations after pivoting to its Puttery concept.
  • Technical indicators suggest that the stock could see some near-term consolidation before extending its intermediate-term move higher.

B. Riley Securities met with Drive Shack's management team earlier this week and came away impressed with its ability to navigate the pandemic, manage cash flow, and restart operations in a strong position after pivoting to the Puttery concept. Analyst Eric Wold expects a proof of concept from the first two Puttery locations during the first half of next year.

After the conversation with management, B. Riley raised its 2021 to 2023 estimates, and as a result, boosted its price target from $4.00 to $5.50 per share – a 90%-plus premium to Wednesday's closing price – and reiterated its Buy rating on the stock.

Chart showing the share price performance of Drive Shack Inc. (DS)
TradingView.com

From a technical standpoint, the stock experienced a golden cross after extending its rally to fresh highs. The relative strength index (RSI) moved further into overbought conditions with a reading of 84.50, but the moving average convergence divergence (MACD) remains in a strong bullish uptrend. These indicators suggest that the stock could see some near-term consolidation before extending its move higher over the intermediate term.

Consolidation in technical analysis refers to an asset oscillating between a well-defined pattern of trading levels. Consolidation is generally interpreted as market indecisiveness, which ends when the asset's price moves above or below the trading pattern.

Traders should watch for consolidation above reaction highs of around $3.05 over the coming sessions. If the stock breaks down from these levels, traders could see a move toward prior highs of around $1.95, although that seems less likely to occur given the bullish fundamentals. If the stock moves higher, traders could see a move toward prior highs of about $4.19.

The Bottom Line

Drive Shack shares rose more than 10% during Thursday's session after B. Riley Securities reiterated its Buy rating and raised its price target to $5.50 per share. While an overbought RSI reading could point to near-term consolidation, the intermediate-term remains bullish, and traders could see further upside over time.

The author holds no position in the stock(s) mentioned except through passively managed index funds.